Tesla Countersues JPMorgan: Tensions Escalate as Feud Over Warrants Continues

Mandatory Credit: Photo by BRITTA PEDERSEN/POOL/EPA-EFE/Shutterstock (11088639k)SpaceX owner and Tesla CEO Elon Musk arrives on the red carpet for the Axel Springer award, in Berlin, Germany, 01 December 2020.

Tesla filed a counter-suit against JPMorgan on Jan. 24, escalating a feud between the two companies stemming from an alleged breach of contract by the automaker. Whether there will be any broader economic fallout from this ongoing feud — for the parties involved or for investors backing them — remains to be seen.

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In November of 2021, JPMorgan sued Tesla over an alleged breach of contract. Partly responsible, JPMorgan reps claimed, was a 2018 tweet from Tesla CEO Elon Musk in which he declared the potential for the company to go public. That plan would later be abandoned, but not before some damage to Tesla’s stock price had taken place in the interim.

At the core of the matter, JPMorgan said in November that the warrants Tesla sold to the bank included standard provisions intended to protect the parties against the economic effects on the warrants of announcements of significant corporate transactions involving Tesla — such as Musk’s infamous tweet. Tesla had paid JPMorgan based on the original strike price, per The WSJ, but did not pay any adjustments claimed by the bank. Further, Tesla claims that JPMorgan received what amounts to billions of dollars in stock as Tesla share prices later skyrocketed.

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As GOBankingRates previously reported, JPMorgan claims it entered into a series of warrant transactions with Tesla, which required the company to deliver either shares of its stock or cash to JPMorgan if, at the time the warrants expired, Tesla’s share price was above the contractual “strike price,” per the filing.

The claimed warrants did expire with Tesla’s share price above that strike price. JPMorgan reportedly demanded the due shares or cash, “but Tesla has flagrantly ignored its clear contractual obligation to pay JPMorgan in full. JPMorgan brings this action to enforce its right to payment,” the filing reads.

Tesla Fires Back With Claims of ‘Bad Faith and Avarice’

Now, Tesla alleges that the bank’s actions amounted to “bad faith and avarice,” according to the countersuit reviewed by The Wall Street Journal.

“JPM pressed its exorbitant demand as an act of retaliation against Tesla both for it having passed over JPM in major business deals and out of senior JPM executives’ animus toward Mr. Musk,” Tesla alleged in the countersuit.

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JPMorgan told The Wall Street Journal that “there is no merit to their [Tesla’s] claim. This comes down to fulfilling contractual obligations.”

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In November of 2021, Musk told The WSJ that “If JPM doesn’t withdraw their lawsuit, I will give them a one star review on Yelp. This is my final warning!”

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About the Author

Yaël Bizouati-Kennedy is a full-time financial journalist and has written for several publications, including Dow Jones, The Financial Times Group, Bloomberg and Business Insider. She also worked as a vice president/senior content writer for major NYC-based financial companies, including New York Life and MSCI. Yaël is now freelancing and most recently, she co-authored  the book “Blockchain for Medical Research: Accelerating Trust in Healthcare,” with Dr. Sean Manion. (CRC Press, April 2020) She holds two master’s degrees, including one in Journalism from New York University and one in Russian Studies from Université Toulouse-Jean Jaurès, France.
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